Navigating Supply Chain Shortages & Optimizing Inventory During and After COVID-19

Supply chains have arguably been one of the worst hit sectors when it comes to disruption during the COVID-19 crisis and the businesses of simply getting products from one place to another has been an uphill struggle of late.

Possibly one of the most critical sectors affected by these supply chain issues has been the medical industry which has seen significant problems accessing essential COVID adjacent products such as PPE and life-saving devices like respirators. Some of the reasons for these issues are obvious, and some are less so, but it's important to take a look at the whole picture - with the benefit of a little hindsight - and try and make the business of medical logistics more resilient in the future.

With that in mind, let's look at how we navigate supply chain shortages and optimize our inventories in the event of a future COVID-like crisis.

Supply Chain Shortages

A notable example of a supply chain issue affecting industries all over the globe is the much-reported semiconductor shortage. The shortage of these tiny chips is reported to have affected 169 industries and is predicted to hit sales to the tune of over $200 billion in 2021 alone.

The medical device industry has been caught in the semiconductor shortage. Sleep apnea and ventilator device manufacturer ResMed had hoped it would be able to capitalize on Philips recalling a line of its own devices - a deal which had the potential to be worth $350 million - but the semiconductor shortage has placed doubt on the company's ability to meet demand.

"We are facing the challenge of providing the volume for our own No.1 market share position and also trying to meet as much of their No. 2 market share position as possible around the world," said ResMed CEO, Mick Farrell. "Supply bottlenecks continue to restrict our access to critical electronic components, especially semiconductor chips, that ultimately limit our net production output."

One of the most telling findings from the semiconductor shortage comes from the discovery that 70% of respondents reported they reply on just a single supplier for the semiconductors. While some delays are lasting only a couple of weeks, still more are being asked to place orders up to 2023 to (hopefully) secure the supplies they need.

This is one of the biggest problems in supply chain resilience. Relying on just one supplier for all your needs may seem convenient when times are good, but when the proverbial hits the fan, as with the COVID-19 crisis, you are left with nowhere to go if that supplier goes down. Of course, the semiconductor shortage is a global issue, but it's always a smart idea to maintain relationships with multiple suppliers, so you have somewhere else to turn in a crisis situation.

Inventory Optimization

Optimizing inventory is the best way to make sure your business is not overstocking but can still meet the demands of your customers. Optimized inventory brings a host of benefits including reduced operational costs, increased customer satisfaction, faster delivery, and balanced inventory levels/reduced overstocking.

There are a number of techniques which can help you better manage your inventory.

Demand Forecasting - Helps you manage stock levels by building accurate and data-led models on sales and revenue for a set period.

Safety Stock - Based on daily usage and lead times, this is the stock you keep in excess of your demand forecasting to help weather any supply chain shortages or other disruptions.

Reorder Point Formula - This formula is a factor of your safety stock levels and demand during lead time and will provide you with the optimal time to reorder essential products.

Inventory Auditing - There's no use just sitting back and assuming everything is running smoothly. You need to be regularly getting down in the warehouse and purchasing office to make sure things are as they should be and whether any changes need to be made.

Implement Digital Management Platform - A digital inventory management platform will make it much easier to keep tabs of all your SKUs and help you avoid overstocking or running out of a critical item.

Final Thoughts

These are just some of the ways you can better optimize your inventory and help your medical logistics keep running smoothly.

COVID is likely to be with us for a while yet and will almost certainly not be the last crisis we face in our lifetimes. However, put the work in now and your brand will have the greatest chance of remaining resilient through such crises in the future.

Supply chain shortages and inventory optimization is set to be a hot topic at LogiMed 2022, taking place in March at the Rancho Bernardo Inn, San Diego, CA.